NEW YORK: US Treasury yields ended higher on Wednesday in choppy trading after the Treasury saw strong demand for a new $24 billion sale of 10-year notes, a sign that higher yields are drawing some buyers back to the market.
The government sold the new notes at a yield of 2.237 percent, which was lower than what traders had expected. Dealers bought the lowest share of the notes since July 2012, and the second-lowest portion on record.
"There is demand, particularly from the overseas investor, and I think that's given some people comfort in terms of maybe the market having based for now," said Dan Mulholland, head of US Treasury trading at Credit Agricole in New York.
Yields briefly fell after the strong auction, before resuming their increase as new corporate supply and the government's auction of $16 billion in 30-year bonds on Thursday weighed on the market.
US debt has posted losses in the past two weeks as German government bonds sold off, which some attributed in part to expectations that inflation in the euro region may increase. Crowded positioning and a reticence by some buyers to enter the market until it shows signs of stabilizing have contributed to the rout.
Treasury yield increases have persisted even as US economic data raises concerns that the economy is cooling, which has pushed back expectations on when the Federal Reserve is likely to begin raising interest rates.
US retail sales were flat in April as households cut back on purchases of automobiles and other big-ticket items, the latest sign the economy was struggling to rebound strongly after barely growing in the first quarter.
"The underlying data wouldn't appear to be exactly something the Fed would want to slow down," said Robert Tipp, chief investment strategist at Prudential Fixed Income in New Jersey.
Higher yields may help Thursday's 30-year bond sale, though demand for long bonds can be uneven.
"Auctions this week probably bode well for the 30-year ... with respect to the demand being there at higher yields," said Credit Agricole's Mulholland. "The curve has steepened quite a bit in the last few weeks, so that will be supportive."
Thirty-year bond yields have increased to 3.07 percent from 2.60 percent two weeks ago. The yield curve between five-year notes and 30-year bonds has steepened to 150 bps, from 130 bps in the same time frame.
Comments
Comments are closed.